Marketing Management - I

FINAL PROJECT TERM 1

PESTL Analysis: Yakult

Section B Group 3

Name Anirudh Lanka Nitesh Goyal Akshay Bhambure Arita Abrol Supreet Mann Satyabrata Parhi

Roll No. 11DM-061 11DM-094 11IB-013 11FN-022 11FN-110 11FN-129

Political Aspects:
The advent of foreign brands produced in India is changing the profile of the national dairy industry. In fact, any multinational food company looking for overseas manufacturing facilities would find India irresistible. Already, companies like Heinz, Britannia, Nestle and Nutricia are gaining popularity. Baskin Robbins and Blue Bunny have also made its debut with a range of premium ice creams. Others are testing the waters before making their debut. This expansion of the industry was achieved through extensive intervention by the Indian government. Until 1991, the Indian dairy industry was highly regulated and protected. The Milk Manufacturing and Procurement Order classed dairy processing and manufacturing as a small-scale industry and restricted the industry to small firms and co-operatives. High import duties, non-tariff barriers, restrictions on exports, and stringent licensing provisions provided incentives to Indianowned small enterprises and co-operatives to expand production in a protected market environment The New Industrial Policy of 1991 and the Milk Manufacturing and Procurement Order 1992 (amended 1993) streamlined activities in the Indian dairy industry. Recent changes which have been introduced include the following: Restrictive regulations on foreign-owned brand names and trademarks were relaxed. Import duties on dairy products and ingredients were reduced.

 Large firms, including foreign-owned firms, were authorised to establish processing and manufacturing facilities for all dairy product categories except ice-cream and non-chocolate confectionary. In budget 0f 2001-02 excise duty was brought down from 16% to 0%. .Total inflow of FDI is 2.7 billion and most of it is coming from EU because of trade agreement with EU. Food processing industries were included in list of priority sector by which making bank lending easy in 1999. Because of infrastructure development roads are good thus transportation was easy for milk products as storage was an issue. The Goods and Services Tax (GST) will influence food purchase in the short term, with some people opting for foods that are GST-free. Over time this may influence the marketing practices of some food companies. The Government continues to encourage the export of value-added foods with development loans and grants. Yakult Danone India (P) Ltd is a 50:50 JV between Yakult Honsha, Japan and Groupe Danone of France, both of which are global probiotic leaders. The JV was formed in 2005 to manufacture and sell probiotic products in the Indian market.

Economic Aspects:
India's diverse economy encompasses traditional village farming, modern agriculture, handicrafts, a wide range of modern industries, and a multitude of services. While the Gross Domestic Product (GDP) in India has expanded 7.7 percent in the second quarter of 2011 over the previous quarter, we have also seen an annual increase of 9.5% in the GDP at Purchasing Power Parity. Further, there has been a 7.57% increase in the Consumer expenditure of 2011 over the last year and the Annual Disposable income has increased by 6.87%. In urban areas, the demand for processed and packaged dairy products which includes Yakult will grow in consonance with a growing population with higher disposable income and higher health consciousness. India is the worlds biggest milk maker, and its milk requirement for consumption as well as production of dairy products is expected to be 180 MT by 2021-22. Presently, we produce only 112 MT. This means milk output must go up by 5.5% per annum over the next 12 years, compared with the current growth rate of 4%. The inflation rate for the year 2011 so far has been averaging around 8% as opposed to a staggering 12.11% last year. Thus it can be inferred that the economic state of India is fairly positive, with a steady increase in all economic parameters like the GDP, Per Capita Income,

Disposable income etc. Further, the increase in inflation is also in consonance with the overall economic growth and is largely controlled. The key cause of concern is the population pressure on the milk produce, and the disparity between its demand and supply. If not controlled, India may turn a net importer in the next 10 years. This is bound to have a negative impact on dairy products as well, resulting in increased cost of production. The economic environment of India is favourable for Yakult. The branded yoghurt and fermented drinks market are growing at 33% and 14% respectively. Although the probiotic market in India is in a nascent stage, going by the current economic trends we can expect an upsurge in the demand for the same in the years to come.

Social Aspects:
1. Changing lifestyle: Population demographics have changed due to increased life expectancy. Lifestyle changes have increased the occurrence of diseases such as hypertension, acidity, blood pressure, etc. There is increased awareness of health and requirement of healthy diet to control lifestyle diseases. Packaged health foods such as cornflakes and health drinks are increasingly becoming a large part of the diet in modern India. 2. Increased employment and income in rural areas: The food processing units have provided alternate employment opportunities in rural areas. Milk processing industry has increased the demand for milk which has led to increase in supplementary income 3. Traditional usage of yogurt: Yogurt has always been a part of Indian diet and people are hesitant to look at other options for their daily fix of probiotics. Given that dahi is an essential and easy thing to do at home, the idea of a market-substitute has teething problems. Particularly if it does not look like set dahi from moms kitchen. 4. Cultural issues: Yakult has empowered its 150 delivery ladies called Ambassadors of Good Health who go around door to door delivering the Yakult product. The door to door delivery system is not picking up due to cultural issues. In India, the Yakult lady system did not get the expected response because of reluctance of parents to send their girls out in the sun. Someone in Yakult told

me that parents in India have concerns about a fair skin: Dhoop mein larki kaali ho jayegi. The harsh sun, they say, would ruin their yet to be married daughters complexion. Yakult got around this problem by pumping products directly in departmental stores.

Technological Aspects:
The improvements in the technology and the increasing expenditure on research and development will affect Yakult in mainly three areas: 1. Manufacturing and Storing: The developments in the methods of preserving the strains such as freeze drying and microencapsulation have made the task of preservation simpler. Preservation of the strains is important as the bacteria starts to die after it is subjected to low temperatures. This would take away the health part of the health drink. These techniques have affected mainly two areas. First, in the way the strains which would be used for seeding the drink are preserved and then how the actual drink is preserved after packaging. The increasing electrification of the country has allowed the use of modern refrigeration equipment in different parts of the country. Preservation of the probiotic products is very much dependent on the temperatures and a constant recommended temperature needs to be maintained to prevent spoiling. The increased electrification will help us the use of modern technology to maintain the preservation conditions at near perfect levels.

2. Marketing: The increasing penetration of the internet has opened up new avenues for reaching out to the audience. The traditional internet marketing will now help us to reach even deeper into the country. The rise of social media websites such as Orkut and Facebook has brought a new platform for marketing of products. It can be used extensively to target the population of age 30 years or less which forms the predominant users of this media. Also, the growth of DTH services has brought cable television to many homes. The television advertisements now reach out to a much wider audience and will help increase awareness of the brand. 3. Competition: The research and development in the probiotics has also brought out new competition from unexpected sources. The ongoing research is looking at different delivery mechanism for the bacteria into the body. Probiotic powders which can be added to our food as an ingredient are currently under testing. Probiotic dairy products such as yogurts and ice-creams are already present in the market (Amul, Nestle, etc.). Probiotic fruit juices have now been introduced into the markets to cater to the vegan and lacto-tolerant markets (GoodBelly). Another radical delivery method which is currently under testing is through drinking straws. The development of drinking straws which will provide our daily requirement of good bacteria just by sipping any liquid through them is currently in progress and are expected to be available in the market soon.

Thus, looking at the current technological environment, the overall impact for Yakult in India can be considered as positive. We can expect the technological progress to aid in the companys growth in the Indian market.

Legal Aspects:
Legal aspects are related to the legal environment in which firms operate. In recent years in India, there have been many significant legal changes that have affected firms' behavior; the introduction of discrimination and disability discrimination legislation, an increase in the minimum wage and greater requirements for firms to recycle are examples of relatively recent laws that affect an organisation's actions. Legal changes can affect a firm's costs and demand. This consists of legislation that is passed by the parliament and state legislatures. Examples of such legislation specifically aimed at business operations include the Trade mark Act 1969, Essential Commodities Act 1955, Standards of Weights and Measures Act 1969 and Consumer Protection Act 196. The most common types of laws include: 1. Anti - Discrimination Laws: these laws, drafted in the Constitution of India, prohibit any entity from discriminating on the basis of religion, race, caste, sex or place of birth. Additionally, it also allows for special provisions to be made for women, children, socially and educationally backward classes of citizens as well as the Schedule Castes and the Scheduled Tribes (SCs and STs). Such special provisions shall not be considered discriminatory. 2. Health and Safety Laws: Indian health and safety laws state that protection must be given to workers from workplace related safety issues. It specifies that the

protective gear such as gloves, guards, helmets, etc. should be provided depending on the hazards the worker will face at place of work. 3. Competition Laws: The Indian competition laws state that keeping in view the economic development of the country, no organization may make implement practices that may have an adverse effect on the competition, in order to promote and sustain a healthy competitive market and to protect the interests of consumers. 4. Labour Laws: The Indian labour law refers to laws regulating employment in India. These laws include laws preventing forced labour, equal remuneration to people with the same skillset, and anti - discrimination laws, to name a few. 5. Consumer Laws: The Indian laws are framed in such a way that the consumers interests are of extremely high priority. Prices are regulated and continuously monitored, and there is a provision for a grievance redressal system.

PESTL: A Brief Overview

Challenges Proposed goods and Political services tax.

Advantages Policy changes in favour of the dairy industry.

Impact

Overall positive impact.

Population pressure on the milk produce. Any disparity in the Economic demand supply will affect prices.

Economic state is fairly positive, with a steady increase in all economic parameters like the GDP, Per Capita Income etc. Overall positive impact.

Hesitant to shift to new options of probiotic supplements Social over traditional choices like yoghurt.

Increased demand for health products with higher disposable income and higher health consciousness. Improved technology Neutral impact. Need to increase acceptance of its product among the Indian consumers.

Technological

None.

aids manufacturing, storing and marketing too.

Largely Positive

To function within the legal framework, adherence of laws Legal such as Health and Safety Laws and Consumer Laws.

Competition Law promotes healthy competition in the market. Ensures competitive fairness. Overall Positive impact.